DUBAI: Companies in the Middle East and North Africa, which rely heavily on bank financing, will have to curtail growth plans as European lenders retrench, unless they find replacement funding sources quickly, senior bankers on Wednesday.
The euro zone crisis is forcing European banks, which had actively targeted the Gulf in particular after the global financial crisis, to return to their home markets and protect their capital ratios.
About 50 percent of cross-border syndicated lending in the Middle East and North Africa (MENA region), in terms of dollar value, has come from European institutions in recent years, Standard Chartered’s global chief executive for non-US operations said.
"What it means for a lot of corporates, who are in good shape, is that they will need to curtail their ambitions," V. Shankar said at an International Monetary Fund event in Dubai.
"No one bank can rush in and fill that 50 percent. Some of that 50 percent will come from regional banks. Can some of it come from local capital markets, probably yes. But it is a real challenge in terms of refinancing risk in the region," Shankar told Reuters in a later interview.
In 2010, Middle Eastern companies raised $52.34 billion in the loan market, according to Thomson Reuters data.
Deutsche Bank MENA chairman Henry Azzam said regional firms would need to look to Islamic bonds, export credit agency-backed facilities and Asian capital markets to fill the gap.
A number of Gulf companies, including Abu Dhabi National Energy Co (TAQA) have been setting up bond programs to access Asian investors, especially in Malaysia.
European banks, in particular French institutions, have lent heavily into the Middle East in the last five years to escape the slowdown in other markets but have recently been deleveraging their loan books to raise dollar funding.
